HSBC pays record $1.92 bn to settle US laundering probe

11th December 2012, 0 comments

Asia-focused bank HSBC said on Tuesday it would pay US authorities a record $1.92 billion to settle allegations of money laundering that were said to have helped Mexican drug cartels, terrorists and Iran.

HSBC, which is listed in Hong Kong and London, said in a statement that it would pay the equivalent of 1.48 billion euros or £1.2 billion as part of an agrement with several US authorities including the US Department of Justice.

The London-based bank admitted to having "inadequate" controls in place, accepted responsibility for the group's past mistakes and added that it would finalise a deal soon with Britain's Financial Services Authority watchdog.

The global giant was thrown into crisis earlier this year when a US Senate report found it had allowed affiliates in Mexico, Saudi Arabia and Bangladesh to move billions of dollars in suspect funds into the US without adequate controls.

US lawmakers accused the company of giving Iran, terrorists and drug dealers access to the country's financial system.

"HSBC has reached agreement with US authorities in relation to investigations regarding inadequate compliance with anti-money laundering and sanctions laws," it said in Tuesday's statement.

"This includes a deferred prosecution agreement with the US Department of Justice.

"HSBC has also reached agreement to achieve a global resolution with all other US government agencies that have investigated HSBCs past conduct related to these issues and anticipates finalising an undertaking with the UK FSA shortly."

It added: "Under these agreements, HSBC will make payments totalling US$1.921bn, continue to cooperate fully with regulatory and law enforcement authorities, and take further action to strengthen its compliance policies and procedures."

In reaction to Tuesday's record fine, HSBC's share price slid 0.25 percent to 639.60 pence in London morning deals. The group's Hong Kong-listed shares rose 0.31 percent to end at HK$79.70.

-- HSBC 'profoundly sorry' --

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"We accept responsibility for our past mistakes. We have said we are profoundly sorry for them, and we do so again," said chief executive Stuart Gulliver.

"The HSBC of today is a fundamentally different organisation from the one that made those mistakes.

"We are committed to protecting the integrity of the global financial system. To this end we will continue to work closely with governments and regulators around the world."

Among the US Senate findings, revealed in July, was the revelation that HSBC and its US affiliate concealed more than $16 billion in sensitive transactions to Iran, skirting US sanctions on the country for a six-year period.

The firm soon afterwards apologised for failing to apply anti-laundering rules and David Bagley, head of group compliance, was forced to resign.

A money-laundering indictment, or a guilty plea, would have severely damaged the lender as it could have cut it off from certain investors such as pension funds and cost it its charter to operate in the United States.

HSBC said it has conducted extensive internal investigations since the revelations and vowed to put in place "robust standards".

Prior to the settlement, HSBC has said in November that it had set aside $1.5 billion for fines linked to money-laundering in the United States.

"HSBC is anxious to draw a line under the affair. Emphasising a transformation at the bank over the last two years, the bank has agreed to pay a record fine," said analyst Keith Bowman at Hargreaves Lansdown Stockbrokers.

"Positively for shareholders, the fine has already been largely accounted for, with the figure seen as more than bearable given the bank's size and strength."

News of the record penalty came one day after British-based emerging markets bank Standard Chartered was hit with a $327-million fine by US authorities to settle charges it had violated US sanctions on Iran, Myanmar, Libya and Sudan.

For Standard Chartered, the fines from the Treasury and other US federal and local regulators brought to $667 million the total it has been charged for sanctions violations.